People's Republic of China

Policies for Sound and Effective Investment in China

Since the start of the economic reform process in the 70s China has been able to
generate a large volume of investment, both from domestic and foreign sources. This
high volume of investment was instrumental in sustaining strong economic growth and
related improvements in living standards. However, this growth model is not longer
sustainable. Returns on investment have fallen, excessive capacity is plaguing several
sectors and the negative externalities have been very onerous, notably in terms of
environmental degradation and rising income inequality. A key objective of the Chinese
government is therefore to move the economy towards a more balanced, sustainable and
inclusive growth path as envisaged by the 13th Five-Year Plan. In this adjustment
process, the country is seeking new approaches for smarter, greener and more productive
investment. This will require mutually reinforcing reforms to improve investment planning,
rebalance the role of government and market forces, mainstream responsible business
conduct and encourage greater private investment, especially in green infrastructure.
China’s growing role as an outward investor may act as catalyser for the required
reforms at home, as Chinese private and state-owned enterprises have to adopt internationally
recognised practices and standards .